On Nov. 4, 2021, Finance Minister Peter Bethlenfalvy released the 2021 Ontario Economic Outlook and Fiscal Review: Build Ontario. The Economic Outlook serves as an update from Ontario’s 2021 Budget and continues to provide support to fight the COVID-19 pandemic and promote economic recovery. While the Economic Outlook has many measures, the proposed new beneficial ownership information requirements are of particular interest to Ontario private corporations.
The new measure is intended to prevent financial crimes and tax evasion and will create obligations on all privately-held corporations governed by the Business Corporations Act (Ontario) (OBCA). Specifically, the government proposes to amend the OBCA to require that a private corporation collect and maintain information on the beneficial owners of the corporation, and that the corporation make such information available to law enforcement, tax authorities and regulatory authorities upon request. Public corporations and their wholly-owned subsidiaries are exempt from these requirements. The new requirements are scheduled to go into effect on Jan. 1, 2023.
A corporation’s requirement to collect and maintain information would apply to an “individual with significant control” of the corporation. The proposed legislation provides that an “individual with significant control” is someone who (1) owns, controls, or directs 25% or more of the voting shares of the corporation or shares that are worth 25% or more of the fair market value of all outstanding shares of the corporation; or (2) has direct or indirect influence over the corporation without owning at least 25% of the shares.
A corporation would need to maintain the following information on each individual with significant control:
- Name, date of birth and address;
- Jurisdiction of residence for tax purposes;
- Date of becoming or no longer being an individual with significant control;
- A description of how the individual has significant control over the corporation, including a description of any interests and rights in shares of the corporation; and
- A description of the steps the corporation takes to keep this information current each year.
Corporations will also be required to update the record yearly, and within 15 days of the corporation becoming aware of a change to any relevant information.
The proposed legislation also imposes penalties on a corporation for failing to collect, maintain and disclose the beneficial ownership information.
While this measure has yet to be enacted, we can expect some variation of the bill to receive Royal Assent due to the recent focus by various governments on beneficial ownership transparency as a way to combat the use of corporations in tax evasion, money laundering or other illicit activities. Corporations should monitor the status of this proposed legislation so that they understand their obligations when the legislation is enacted.